Question

The formula for the steady-state ratio of capital to labor (k*) with population growth at rate n but no technological change, where s is the saving rate, is s:

Answer 1

Answer:

D). multiplied by f(k*) divided by the depreciation rate.

Explanation:

As per the formula for the steady-state ratio of capital to labor, s or the saving rate is 'multiplied by f(k*) i.e. the population growth rate and divided by the rate of depreciation.' This is calculated to ensure that the economy reaches optimal capital-labor ratio i.e. 'k' which will remain perpetually. Thus, option D is the correct answer.

Answer 2

It should be multiplied by f(k*) divided by the rate of depreciation.

The following information regarding the steady-state ratio is:

• The formula of steady-state ratio of capital to labor or the rate of saving should be multiplied by f(k*). This denotes the growth rate of population and it should be divided by the depreciation rate.
• It should be determined that the economy should reached to the capital labor ratio i.e. K.

Therefore we can conclude that It should be multiplied by f(k*) divided by the rate of depreciation.

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